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Even though there are many positive aspects to buying a home, let’s not overlook the potential drawbacks as well. Do you remember a time when a major appliance in your apartment broke down? You probably just had to call your front office or landlord and they were out to fix or replace it at no cost to you within a matter of hours or days. When you own your own home, there may be many unexpected repair and maintenance costs that you otherwise wouldn’t have if you were renting.

Another thing to consider is the potential to actually lose money on the house. While over time real estate has generally gone up in value, there are times when the real estate market stays relatively flat or actually declines. Depending on the costs associated with the sale and the actual amount you sell the house for, you could lose money.

Finally, buying a home is a long-term proposition. When you rent, you may only be bound to a month-to-month or annual lease, so picking up and moving can be done on relatively short notice. Once you buy a home, it isn’t as easy to just pick up and move. You have a significant financial obligation, and the process of selling a home may take several months to complete.

So, when you are buying a home, take the time to understand the benefits and drawbacks, and make sure you are doing it for the right reasons.

Determine How Much Home You Can Afford

If you have decided that buying a home is right for you, the first step is to determine what you can afford. One of the common guidelines to use is the debt-to-income ratio. Most lenders suggest that your total debt-to-income ratio should not exceed 36%, and your mortgage debt alone should be less than 28% of your monthly income.

To calculate your personal debt-to-income ratio, first add up your total monthly gross income. Once you have that figure, multiply it by 36%, or 0.36. This number is the maximum amount of monthly debt payments you should have, including your mortgage.

Next, add up all of your current monthly non-mortgage debt payments and subtract it from the previous total you just calculated. This number will give you an approximate maximum mortgage payment you can afford. Ideally, this amount should be 28% or less of your monthly income.

Even with these guidelines, it is important to remember that your personal situation will ultimately dictate what you can truly afford, so take all aspects of your situation into consideration.